After many years of biosynthetic studies, we have achieved a medicinal chemistry breakthrough, i.e. the net cell-free synthesis of penicillins and cephalosporins using Cephalosporium acremonium. We have achieved net cell-free ring formation of iso-penicillin N from gamma-(L-alpha-aminoadiphyl-L-cysteinyl-D-valine) and net ring expansion of penicillin N to deacetoxycephalosporin C. We plan to develop rapid chemical assays for these two reactions, purify the enzymes, determine whether methionine induces or activates them, whether glucose represses or inhibits them, test potential intermediates and synthetic precursor analogoues for conversion and set up an assay for the hypothetical racemase converting isopenicillin N to penicillin N. It is hoped that not only will this work elucidate the biosynthetic pathway to and the mechanisms regulating beta-lactam antibiotics but could lead to new and useful beta-lactam antibiotics.